RISI China Conference: Bottlenecks and empty bowls
Cao Zhenlei of CTAPI

RISI China Conference: Bottlenecks and empty bowls

China’s government has created fiber procurement difficulties for its own papermakers.

January 3, 2019

Paper recyclers in North America and Europe spent 2018 dealing with the ramifications of the Chinese government’s policy to greatly restrict recovered fiber imports during the year. Sometimes lost in the English language coverage of events were the difficulties faced by Chinese papermakers because of the policy.

At the 2018 RISI International Recycled Fiber and Containerboard Conference, which took place in December in Shenzhen, China, several speakers addressed the new policies from the perspective of the former buyers of North American and European fiber.

Cao Zhenlei of Beijing- based papermaking association CTAPI, summarizing the supply strain to feed the enormous capacity of paper mills in China and looking toward more of the same in 2019, commented, “We have the bowl, but where can we find the rice?”

Cao reviewed figures showing China’s recent annual production of packaging paper, portraying a story of growth from less than 60 million tons in 2005 to about 110 million tons in 2017.

He also demonstrated the sector’s reliance on imported fiber, noting that while domestic collection in China has increased throughout the decade, in 2017 the nation’s mills imported some 25.7 million tons of recovered fiber, or 35 percent of what it consumed. “We have a good market, but we rely heavily on imports for fiber,” he stated.

According to Cao, the collection rate of recovered fiber has reached about 60 percent in China, which he described as the “world average” for nations with developed economies.

While imports remain necessary, Cao remarked that the government moves also were necessary to curtail “irresponsible importers” bringing in low-quality fiber. At the same time, the strains on supply were beginning to have a “dramatic influence on the profitability [of] China’s paper industry in 2018.”

Chinese papermakers also were likely to have produced from 6 to 8 million tons less paper and board in 2018 compared to the year before, according to Cao. “This is not something that is very pleasant, but I think it is the truth,” he stated.

Ken Huang, strategy general manager for China-based paper and board Shanying International, referred to recovered paper as a “precious raw material for international trade” for his company, which sometimes can be at odds with its portrayal as “foreign garbage” in China.

With the new restrictions in place, Huang referred to imported pulp as “the best solution” for Shanying, which is investing to produce pulp in other parts of the world and ship it to China. This, he said, can help “break the bottleneck” in the company’s supply chain. (The company bought a pulp and paper mill in Kentucky in the United States in mid-2018.)

Huang said using such methods to overcome the “supply chain risks” for paper mills can help Shanying attain annual production growth targets. “We still think the industry is very positive,” he remarked, saying it can continue to grow at a two-to-three percent annual rate.

The 2018 RISI International Recycled Fiber and Containerboard Conference was Dec. 5-7 at the JW Marriott Shenzhen.